A surplus-lines insurer is facing a federal lawsuit over allegations it sat on a contractor's CGL claim for more than two months before issuing a denial.
Elegant Reflections, LLC, a Houston-based contractor doing business as ER Contracting, filed the action against Evanston Insurance Company on February 17 in the US District Court for the Southern District of Texas. The case, which is in its early stages and has not yet been ruled on, puts a spotlight on a question that matters to every insurance professional handling claims in Texas: what happens when statutory deadlines are missed?
The dispute traces back to December 2021, when ER Contracting entered into a contract with Tupelo Children's Mansion to perform construction and renovation work on two properties in Tupelo, Mississippi. A disagreement later arose over the quality of the work - specifically, allegations that defective footings led to consequential foundation damage and required slab replacement. Tupelo Children's Mansion brought negligence and breach of contract claims against ER Contracting in arbitration.
ER Contracting turned to its CGL insurer for help. It notified Evanston Insurance in writing on February 5, 2025, requesting a defense and indemnification. Evanston acknowledged the claim six days later, on February 11. But the formal denial did not arrive until April 15 - more than two months after notice was given.
In that denial, Evanston took the position that the allegations did not amount to "property damage" caused by an "occurrence" under the policy and pointed to several exclusions.
ER Contracting sees it differently. The contractor argues the claims are covered under the policy's insuring agreement and that key exclusions do not bar coverage. It points to the products-completed operations hazard exception, which carves back coverage that Exclusion (j)(6) for "Damage to Property" would otherwise remove. It also argues that the "Damage To Your Work" exclusion does not apply in large part because most or all of the alleged damage is consequential - meaning it extends beyond the contractor's own work.
But the coverage question is only part of the story. The filing leans heavily into allegations that Evanston ran afoul of the Texas Prompt Payment of Claims Act. Under Chapter 542 of the Texas Insurance Code, when a surplus-lines insurer does not request additional information after receiving a claim, it has 15 business days to accept or reject. According to the filing, Evanston never asked for anything further — yet took until April 15 to respond. The contractor also alleges violations of Section 541.060, accusing Evanston of unfair settlement practices, including failing to conduct a reasonable investigation before denying the claim.
ER Contracting is seeking a court declaration that Evanston must defend and indemnify it in the ongoing arbitration. It is also pursuing damages for breach of contract, breach of the duty to defend, breach of good faith and fair dealing, and statutory penalties under the Texas Insurance Code.
The case is worth watching. For claims professionals and surplus-lines carriers operating in Texas, it is a pointed reminder that how quickly you say "no" can matter just as much as whether you were right to say it.
